Why Shares of Denny's Corp. Are Soaring Today

What happened

Shares of Denny's Corp. (NASDAQ: DENN) jumped on Thursday after the company reported better-than-expected fourth-quarter results. Positive same-store sales growth and an operating margin increase was enough to send the stock up 13% by 11:45 a.m. EST.

So what

Denny's reported fourth-quarter revenue of $129.6 million, up 4.5% year over year and less than $1 million higher than the average analyst estimate. Domestic systemwide same-store sales rose by 0.5%, with a 0.1% increase at company restaurants and a 0.6% increase at franchised restaurants. Denny's acquired one franchised restaurant, opened 12 new franchised restaurants, and closed seven franchised restaurants during the quarter.

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Image source: Denny's.

Non-GAAP EPS came in at $0.17, up from $0.11 during the prior-year period and $0.04 better than analysts were expecting. GAAP EPS was $0.15, up from $0.11. Company stores managed an operating margin of 17.5%, up 230 basis points year over year, while Denny's franchise operations produced an operating margin of 72.1%, up 220 basis points. A lower tax rate also helped boost net income.

CEO John Miller summed up the company's results:

Now what

Denny's expects same-store sales growth at company and franchised restaurants between 0% and 2% in 2017, with net restaurant growth of 10 to 20 units helping to drive revenue between $523 million and $532 million. Company restaurant margins are also expected to remain high, with a guidance range of 17.5% to 18%.

Denny's fourth-quarter results and guidance were both solid, particularly given the difficulties other restaurant chains are having. Investors viewed even sluggish same-store sales growth positively, and the significant earnings beat was icing on the cake.

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Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.